Next Project: Apple Era Behind Him, Steve Jobs Tries Again, Using a New System

Well-Funded Now, He Offers Computer Meant to Meet Users' Entire Wish Lists

Revolutionary or Just New?

By Brenton R. Schlender, Staff Reporter
The Wall Street Journal

October 13, 1988

San Francisco -- The computer industry's prodigal son has returned.

"It's great to be back," said Steven P. Jobs as he opened a multimedia extravaganza to show his latest creation, what he calls "the first computer of the 1990s."

"This is what we've been working on for the past three years," Mr. Jobs added, patting the machine like a pet dog. And playing to a packed house at Louise M. Davies Symphony Hall here yesterday, he put the machine through its paces -- and worked the crowd like an entertainer. They loved it, clapping even as he described a 10-foot power cable. A duet between the computer and a violinist closed the show.

When we last saw Mr. Jobs three years ago, he had just resigned as the chairman of Apple Computer Inc. after a bitter power struggle with his handpicked successor, John Sculley. And for Mr. Jobs, the bitterness clearly lingers on.

Not a single Apple employee was invited to the unveiling of his new computer yesterday, even though more than 3,000 invitations were sent out. And since being cast out of the company he helped found, Mr. Jobs has resisted Mr. Sculley's attempts to bury the hatchet, telling friends that being squeezed out hurt too much to forgive or forget.

Right after resigning from Apple, Mr. Jobs, along with four other defectors, retreated to his sparsely furnished house in the hills overlooking Silicon Valley to mull what would come next.

There, they hatched an ambitious plan aimed at challenging their former employer as the industry's technological pacesetter, much as Mr. Jobs had helped shape the personal-computer industry with the Apple II and Macintosh computers. The name he picked for his new company and computer was to the point -- Next.

With that, Mr. Jobs -- once called "the P.T. Barnum of the computer industry" by Sun Microsystems Inc. co-founder William Joy -- uncharacteristically sank from sight. He surfaced once in 1986 to unveil his catchy, block-shaped Next logo, which was designed by Paul Rand, who also did the logo for International Business Machines Corp. And Mr. Jobs surfaced once in early 1987 to announce that another entrepreneurial maverick, Texas billionaire H. Ross Perot, had invested $20 million in Next Inc. Otherwise, Mr. Jobs shunned public appearances at computer-industry events to avoid having to comment publicly about his new company's activities.

But yesterday, with all the subtlety of a Hollywood premiere, he introduced his new, sleek "personal workstation" for university students and educators. It is a machine that he vows will "revolutionize" higher education and perhaps even the computer industry.

Among the Next Computer System's components are many dazzling features: a magneto-optical disk drive that can hold over 300 times the capacity of a conventional floppy disk on a single removable disk; software tools that Next contends make it the easiest to program of any personal computer or workstation to date; and a powerful signal-processor chip that can act as a modem, play music or synthesize the human voice. Moreover, the machine also offers the usual features of popular technical workstations, such as slick graphics, a huge memory and a souped-up variation of American Telephone & Telegraph Co.'s Unix operating system.

But many computer experts believe that the real genius of the Next computer doesn't lie in its technical prowess but in the stylish way that Mr. Jobs designed and packaged so many powerful features into such a relatively inexpensive, easy-to-use system. And they marvel that he paid as much attention to the mundane manufacturing processes as to the computer itself. He personally supervised the construction of a highly automated plant in Fremont, Calif., that he expects to make Next a low-cost competitor. The Next computer, at its initial price of $6,500, is aimed squarely at Apple's Macintosh II and the technical workstations from Sun Microsystems -- machines that offer fewer fancy features but can cost three times as much.

The Next computer offers so much more for the money that Mitch Kapor, the founder of Lotus Development Corp., contends that it will "redefine what people expect from a personal computer."

"Steve always tries to make his computers exceed what people expect them to be, and the guy has done it again," says Stewart Alsop, publisher of PC Newsletter. What are his chances of creating another computer standard? "He's done it twice before, hasn't he?" Mr. Alsop replies.

Not everyone is impressed. Some competitors say Next's price-performance advantage won't last long when the companies he is challenging, particularly IBM, Sun Microsystems and Apple, introduce new products next year or cut prices. Apple itself is staying officially mute about the Next computer.

And some don't even consider it a breakthrough machine. "Frankly, I'm disappointed," says William H. Gates, the founder of Microsoft Corp. "Back in 1981, we were truly excited by the Macintosh when Steve showed it to us because when you put it side-by-side with another computer, it was unlike anything anybody had ever seen before" because of its distinctive graphics. But with regard to the Next computer, he says, "In the grand scope of things, most of these features are truly trivial." Although Microsoft develops popular programs for IBM and Apple personal computers, Mr. Gates says there's "no way" he will have his programmers write software for Next any time soon.

"Steve is going to talk revolution in the computer business, but unfortunately you'll find more similarities than differences between his machine and other workstations," adds Mr. Joy of Sun Microsystems, probably Next's main competitor. "And some of the differences that glitter now may well tarnish in a while."

The real wild card, however, may not be Next's computer at all but Mr. Jobs's mercurial personality and hard-driving style -- which in the past have alienated as many employees, suppliers and colleagues as they enthralled and which ultimately forced him to leave Apple.

"The big question is whether Steve can master some of the destructive side of his personality that has emerged in the past," Mr. Kapor says. "If he can do that -- and there are signs that he has -- I think he can succeed."

One possible sign of Mr. Jobs's newfound maturity is his painstaking attention to corporate organization. Mr. Jobs is intent on building another billion-dollar powerhouse, and the way he's going about it is as calculated, flashy, ambitious and risky as the Next computer itself. And the 33-year-old entrepreneur has lined up an impressive array of banks, suppliers and consultants. While at first focusing on a small enough market for a start-up company to make a splash in, he has laid the groundwork for bigger things ahead.

Indeed, Next never was a start-up in a garage. Endowed with $12 million of Mr. Jobs's own money, $1.3 million from Stanford and Carnegie-Mellon universities and Mr. Perot's millions, it was born rich. Morgan Guaranty Trust Co., the bluest of the blue-chip lenders, is its lead bank. Next had plenty of cash to develop its state-of-the-art Fremont factory and is seeking a site for a campus headquarters.

Next's Japanese vendors, who sell the company everything from chips, monitors and laser-printer engines to a pioneering removable optical-disk storage device, have granted the company open terms of payment. Even though Next has yet to ship a computer, Tandem Computer Inc. has virtually donated much of the equipment that Next is using to set up an information-systems department powerful enough for a broad-based company with multiple channels of distribution. Consultants and other vendors say they grant Next deep discounts -- as much as 50% off -- in return for the free publicity that supplying the company generates.

Next's goal, says Susan Kelly Barnes, its 33-year-old chief financial officer, is to have the corporate organization in place to become a billion-dollar company "so we won't be breaking down just at the time we get that big." She adds, "Outside people and vendors have millions invested in the company off the balance sheet. And the terms are like a student loan."

With all that backing and advance planning, the company clearly harbors ambitions beyond selling computers to academia. But for now, Next has set its sights solely on campus sales. "Believe it or not, that's all we're targeting," says Dan'l Lewin, vice president for marketing.

Outsiders discern a "Trojan horse" strategy aimed at selling the machine to the people most likely to experiment with all its snazzy features.

"The idea appears to be to seed the nerds and enthusiasts and let them make the computer look good, much like hobbyists transformed the original Apple II into a broadly popular machine," says David Grady, who publishes the Grady Report, a newsletter on computers in education. "Once it's established in the universities, they can take it into the mainstream."

Despite the academic computing market's affinity for dazzling innovations, Mr. Jobs won't break into it easily. "He has to win a niche market somewhere to get started," agrees Regis McKenna, the founder of Regis McKenna Inc., a Silicon Valley market strategist whose best-known client is Apple. "But I think it's going to be fairly tough to win in education, because all the biggies -- IBM, Apple, Digital Equipment, Hewlett-Packard, Sun and Apollo -- already are fairly well established. They also give away a lot of free equipment."

Reliable market data on the academic computing market are scarce, mainly because of the turnover in student bodies. But Next's competitors generally agree that next year higher education will spend about $2 billion on personal computers and workstations, up about 50% from this year. And the Chronicle of Higher Education estimates that although 13 million faculty members and students are at colleges, only about 1.5 million personal computers and workstations are on the campuses; thus, a lot of potential customers remain.

Mr. Jobs is betting that the Next computer, which he contends is much easier to program than personal computers or other workstations, will make a big splash right away. According to John P. Crecine, one of three Next directors and the president of the school of information at Georgia Institute of Technology, the company hopes to ship between 25,000 and 30,000 computers after deliveries to customers begin next year. (Next will ship some to software developers late this year.) Assuming that Next charges the full $6,500 price, its revenue will approach $175 million if those sales targets are met.

Judging from the interest shown by university officials who have seen the machine, Next won't have much trouble selling it initially.

"I think it's an incredible value," says Peter Lyman, the director of the Center for Scholarly Technology at the University of Southern California in Los Angeles. Mr. Lyman, who has already ordered several Next computers, praises the ease of programming, the removable magneto-optical disk drive that can hold the equivalent of 100,000 pages of text, and the software compatibility with other workstations. "They listened to what we asked for and gave it to us," he says.

Mr. Jobs seems to have learned a lesson from his days at Apple, when he developed products with almost open disdain for what users thought they wanted; he believed that he and his engineers knew better. Ironically, one reason Next developed such close ties was Apple's legal action against Next in late 1985, charging that Next had misappropriated Apple trade secrets. While the now-settled lawsuit was pending, Next engineers couldn't engage in product design.

"We had this time on our hands, so we decided to tour about 30 universities and ask what their fantasy machine would be," recalls Guy L. "Bud" Tribble, Next's director of software engineering.

Some university officials whom they visited joined what Next called its advisory board, and they made suggestions about the computer's development. Although they were intrigued by Mr. Jobs and his computer, Next's penchant for secrecy irritated some of them. "You wouldn't believe the pressure we've been under to give people hints about the machine," says Barbara Morgan, the director of advanced technology planning at the University of California at Berkeley. "I'm not sure I'd want to do this again."

Many who have worked with Mr. Jobs in the past, however, marvel at how he kept Next's activities under wraps. "At Apple, we used to joke that it was the only ship we knew of that leaked from the top," says John Couch, who directed the team that developed Apple's Lisa computer. Mr. Jobs brought in friends and even newspaper reporters for peeks at products under development.

"If Steve has learned anything," says Michael Murray, another former Apple employee, "he's learned how to keep his mouth shut."

In more ways than not, however, Mr. Jobs is his old self -- an intense, outspoken perfectionist driving his employees as hard as they will let him. In Next's three years, some 20 employees, out of about 170, have quit. The pace "was too grueling for some," says Dennis Brothers, who left Next during the summer. Despite leaving, he terms working there "one of the more interesting experiences of my life."

And Mr. Jobs apparently still shows little patience when he feels an employee isn't up to snuff. In early 1987, he fired Linda Wilkins, an early employee who was overseeing manufacturing. Last fall, she sued Mr. Jobs and Next, charging that he had "wrongfully harassed" her and "inflicted emotional distress" and alleging that she had been fired without cause. Next's attorneys have asked that the still-pending case be dismissed. None of the people involved would comment further.

On the whole, however, employee morale has held up remarkably well. Employees say Mr. Jobs even appears to have mellowed a bit. Though still working long hours and setting unrealistic deadlines and price goals, he is a little easier on employees, veterans from the Apple years say. To ensure that employees take their vacations, for example, Next won't let them accumulate vacation time.

One possible reason Mr. Jobs has loosened up: He and many other key employees are in their 30s, and many have wives, children and outside interests. The team that developed the Apple Macintosh under Mr. Jobs, by contrast, averaged in the mid-20s.

"In the Macintosh group, there was no difference between people's work life and social life," says Stacy Bressler, a former Next employee. "That's still true for some of the younger Next employees, but not for everyone there."

The seasoning helped the staff ride out development-cycle problems that delayed introduction of the computer from last spring until now and doubled the price Mr. Jobs originally wanted to charge.

Mr. Perot's guidance helped, too. About a year ago, two crucial custom-made chips came back from the manufacturer with modifications that Next hadn't requested. After several months of trying to determine whether it was a design problem or a manufacturing problem, some on the development team were ready to junk the chips and start over. But insiders say Mr. Perot -- like Mr. Jobs, a director -- persuaded them to stay the course.

"It was a demoralizing time, but, in hindsight, it gave the software people a chance to catch up," says Mr. Crecine, the third director.

As yesterday's product introduction drew near, tension built up inside and outside Next. Some of the company's main vendors and partners groused that Mr. Jobs didn't want to share the limelight during the 2 1/2-hour extravaganza or even allow them to participate in the subsequent press conference.

Compared with his legacy at Apple, however, Mr. Jobs has been gracious and open in his dealings with outsiders, and he is unabashed about using outside technology. While Mr. Jobs was at Apple, for example, very little of the software controlling the inner workings of the Macintosh came from outside the company. But at Next, the crucial operating-system software called MACH came from outside. So did many features of the computer's slick look and feel. And so did much of the applications software bundled with it, such as the mathematics program and programming languages.

Next insiders say most employees don't even think about their boss's tumultuous times at Apple, mainly because fewer than 20 Next employees ever worked there. But Ms. Barnes admits that she sometimes thinks back to the good times she had in the Macintosh development group and its pirate flag and its buccaneering spirit. "It's kind of like looking back on high-school experiences when you're in college," she says. "Sure, high school was fun, but college is so much better."

                 How the Next Computer System 
                 Stacks Up Against Its Rivals
                  Next Inc. Computer System
  Price:                $6,500
  Microprocessor:       Motorola 68030
  Memory:               Eight megabytes
  Disk Drive:           256-megabyte magneto-optical drive 
                        (no floppy disk available)
  Monitor:              17-inch high-resolution black and 
  Operating system:     MACH (Unix compatible)
  Software included:    Postscript video and page-description 
                        language, text retrieval program, 
                        Mathematica equation-solving 
                        software, electronic-mail software, 
                        WriteNow word processor, Sybase Corp. 
                        Database program, network-access 
                        software, various software 
                        developement tools, music kit, sound 
                        kit, dictionary and thesaurus, 
                        Oxford's Dictionary of Quotations and 
                        Oxford Complete Works of Shakespeare.
               Sun Microsystems Inc. 386I/150
  Price:*               $16,990
  Microprocessor:       Intel 80386
  Memory:               Eight megabytes
  Disk drive:           327-megabyte hard disk
  Monitor:              15-inch black and white
  Operating system:     Unix plus MS-DOS 3.3 operating 
  Software included:    Sun Organizer user interface
              Apple Computer Inc. MacIntosh IIx
  Price:*               $13,862
  Microprocessor:       Motorola 68030
  Memory:               Eight megabytes
  Disk drive            192-megabyte hard disk
  Monitor:              19-inch black and white
  Operating system:     Apple operating system -- for Unix 
                        capability add about $2,600
  Software included:    Hypercard
             Compaq Computer Corp. 396 Model 300
  Price:*               $19,751
  Microprocessor:       Intel 80385
  Memory:               Eight megabytes
  Disk drive:           300-megabyte hard disk
  Monitor:              12-inch amber/green
  Operating system:     Purchased separately -- for Unix add 
                        about $695
  Software included:    None

*For comparative purposes, prices reflect addition of optional equipment to provide for similar features that Next computer offers in its standard model.

Sources: Company reports

What's Next: Mouse, a Sleek Monitor And a 'Magneto-Optical Drive'

By Brenton R. Schlender
The Wall Street Journal

October 13, 1988

PALO ALTO, Calif. -- Steven P. Jobs is crouching on his knees in a chair in front of the video monitor of Next Inc.'s new computer. He has just finished a 20-minute demonstration of how the machine can help him create models of molecules, play digitized music, or, appropriately enough, look up the meaning of the word "prodigality" from its built-in dictionary.

"So, what do you think?" he asks almost breathlessly, with all the pride of a first-time father. "Isn't it cool?"

If nothing else, the Next computer was born to be shown off. From the cube-shaped black box that holds its electronic innards, to the sphinx-like monitor you can tilt at any angle with one finger, right down to the tiny, three-dimensional Next logos on every component, it is a masterpiece of industrial design. William H. Gates, the famed chairman of Microsoft Corp., calls it "the most beautiful-looking computer I've ever seen," even though he and other Next competitors contend that it hasn't any special performance edge.

The machine's electronic circuitry is housed in the one-foot magnesium cube that sits under a desk. Engineers chose magnesium because it can dissipate heat well and can confine the electromagnetic radiation from the circuitry. The basic system includes eight megabytes of memory -- 12 times the memory that comes standard in most personal computers and twice that found in many workstations.

Its brain is Motorola Inc.'s most advanced conventional microprocessor, the 68030, the same chip that Apple Computer Inc. uses in its most powerful Macintosh computer and that Sun Microsystems Inc. and Apollo Computer Inc. use in many workstations. The Next machine also incorporates a math co-processor chip to handle number-crunching and a special chip called a digital signal processor that, with the proper software, can transform the computer into an electronic music synthesizer. These two chips, both also made by Motorola, free the 68030 to handle the graphics and other data processing.

A slim, black keyboard, with green and white letters and numerals, and a matching mouse pointing device plug into a 17-inch, black-and-white, high-resolution monitor supplied by Sony Corp. Although the machine can generate stereo sound when it is plugged into a stereo system, the computer itself provides one speaker housed under the monitor, which swivels on the desk.

"We designed the monitor with the case arching over the top so it looks like a stage in a theater," says Hartmut Eslinger, an industrial designer for a company called frogdesign, of Los Gatos, Calif., which crafted the outward appearance of the computer's parts. "The idea is to make a little play of the software performing."

But the machine's most striking standard feature is its magneto-optical drive, which can hold 256 megabytes -- roughly 100,000 typed pages on a single removable disk costing about $50. That's equal to the amount of information that can be held on about 320 floppy disks used by most International Business Machines Corp. and Apple Macintosh personal computers.

To overcome the slow data-retrieval times that plague most optical drives, the machine also has two unusually complex integrated circuits. The result is the biggest, fastest optical drive available to personal computer or workstation users.

The disk shipped with the machine will contain, among other things, a dictionary and thesaurus, a dictionary of famous quotations and the collected works of William Shakespeare, as well as a text-search program, a word processor and a mathematics program. The machine doesn't have a conventional floppy-disk drive.

"Students will be able to accumulate the body of all their work during their whole college career and keep all the reference materials and software they need on a single disk," Mr. Jobs says.

The machine comes ready to plug into computer networks and uses MACH, a variation of American Telephone & Telegraph Co.'s popular Unix operating system. Consequently, it can run much of the technical and engineering software that runs on other Unix machines made by Sun, Apollo, Digital Equipment Corp. and Hewlett-Packard Co. And Next is offering an optional $2,000 laser printer that provides twice the printing quality of most other desktop laser printers.

Many academicians especially like the ease with which the computer can be programmed. Mr. Jobs contends that its "object-oriented" programming languages and "interface building tools" will enable programmers to write programs using snazzy graphics in one-tenth the time it takes to write similar programs on other Unix workstations and personal computers.

"If the Next machine can really bring down the time to write a program from months to weeks, people won't care how much it costs. They'll buy it," says Raymond Neff, vice president for information services of Case Western Reserve University in Cleveland.

(See related story: "Next Project: Apple Era Behind Him, Steve Jobes Tries Again, Using a New System --- Well-Funded Now, He Offers Computer Meant to Meet Users' Entire Wish Lists --- Revolutionary or Just New?" -- WSJ October 13, 1988)

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